In a desperate attempt to salvage his tarnished image, Alex Rodriguez has appealed an arbitrator’s decision that imposed a 162-game suspension from Major League Baseball. The arbitrator, Fredric Horowitz, actually reduced the suspension from 211 games to 162 games. Rather than accept the arbitrator’s award, A-Rod chose to sue the players’ union and MLB in federal court. A-Rod’s appeal alleges, among other things, that Horowitz was biased in his ruling and exhibited a “manifest disregard for the law” and that the players’ union and MLB acted in bad faith. The likelihood that A-Rod will succeed in his appeal is almost as low as his chances of being a first-time ballot inductee into the Baseball Hall of Fame.
Generally, arbitration awards are final and binding. In most jurisdictions, only in very rare situations does a losing party actually have grounds to appeal and vacate an arbitrator’s decision. Even A-Rod’s attorneys have acknowledged that the standard to overturn his arbitration decision is high.
A-Rod’s suspension and appeal are getting a lot of media attention. Many find the legal system — and specifically the arbitration process — confusing. For baseball fans in this camp, it is puzzling why A-Rod is challenging his suspension. Given this confusion, there has been a lot of commentary on the arbitration process and A-Rod’s chances of success for getting the arbitrator’s decision overturned. In my years of practice I have learned that there is no shortage of confusion about the arbitration process. Many employers, like baseball fans, have a limited understanding about arbitration.
As a starting point, arbitration is an alternative way to resolve legal disputes. Instead of litigating a dispute in the court system, adverse parties select an independent arbitrator or a panel of arbitrators to decide the outcome.
Beyond that, many misperceptions exist about arbitration. Before an employer decides to implement an arbitration program, it should understand the pros and cons associated with arbitration. Here are some of the key factors to consider:
Quickness of Decisions:
Generally, a party can receive a ruling quicker in arbitration than in the court system. This is largely because the parties engage in less discovery in arbitration. Arbitrators are also less inclined to grant dispositive motions (such as motions to dismiss and motions for summary judgment) which keeps the matter moving without delay. On the flip side, an arbitrator’s inability or unwillingness to dispose of a frivolous claim before a final hearing is conducted can sometimes result in protracted litigation. In addition, it is not uncommon for a party to challenge an arbitration agreement or otherwise oppose arbitration in lieu of court litigation. Such challenges can be costly and expand litigation.
Costs and Time:
Because the amount of discovery conducted in arbitration is typically less than in court litigation, arbitration can save the parties both time and money. Arbitration, however, is not always less expensive. There are required filing fees to initiate an arbitration that can be substantial. Also, arbitrators charge hourly fees for their time. In contrast, the costs required to initiate a court proceeding are relatively low and the parties do not pay for the judge’s time.
Control of Decisionmaker:
In arbitration, the parties select who will serve as the arbitrator(s). This allows the parties to select arbitrators who they believe have sufficient knowledge and experience to decide the legal issue in dispute. This can be very helpful and important in disputes involving complex or unique legal issues. In court litigation, the parties are assigned a judge. Thus, the parties have less control over who will hear their case.
Formality of the Process:
Arbitration is less formal than court litigation. The arbitration hearing itself is often conducted in a conference room as opposed to a court room. Scheduling issues, disputes about discovery and other procedural matters are commonly handled by telephone conference calls as opposed to in-person hearings. This may be appealing to certain employers. But a relaxed process may not always be beneficial. Arbitrators may not follow procedural rules closely and may be resistant to imposing penalties on a party who engages in discovery abuses or does not follow agreed upon processes. The lack of formality can also result in unpredictability.
Confidentiality:
Unlike court proceedings. which are public, the parties to an arbitration can agree to treat arbitration as confidential, including the arbitration decision.
Appeal Rights:
Generally, an arbitrator’s award is final and binding. This is a positive factor for a party that desires to obtain certainty, no matter the outcome. If the heart of a dispute involves the interpretation of a statute as opposed to deciding a pure factual dispute, however, arbitration may not be a good choice for an employer. This is because the ability to vacate an arbitrator’s award is difficult, even where the arbitrator made a mistake interpreting the statute. Thus, regardless of the type of case, an employer may prefer to always have the benefit of appealing an adverse ruling.
Based on the foregoing, the decision to have disputes handled through arbitration should not be made lightly. There are many pros and cons to arbitration that should be considered before an employer decides to compel employment disputes to arbitration. Indeed, as A-Rod is discovering, the ramifications of making a wrong decision can be significant.
Kenneth Winkler, a shareholder at Berman Fink Van Horn, helps employers navigate the employment laws and regulations that govern the workplace.
